CEO Compensation and Sustainability Reporting Assurance: Evidence from the UK

Posted: 2 Feb 2018

See all articles by Habiba Al-Shaer

Habiba Al-Shaer

Newcastle University Business School

Mahbub Zaman

Hull University Business School

Date Written: October 31, 2017


Companies are expected to monitor sustainable behaviour to help improve performance, enhance reputation and increase chances of survival. This paper examines the relationship between sustainability committees and independent external assurance on the inclusion of sustainability-related targets in CEO compensation contracts. Using a sample of UK FTSE350 companies for 2011–2015 and controlling for governance and firm characteristics, we find both board-level sustainability committees and sustainability reporting assurance have a positive and significant association with the inclusion of sustainability terms in compensation contracts. However, there is no joint impact between the voluntary use of independent external assurance and the role of sustainability committees on CEO compensation contracts. Sustainability-related terms in compensation contracts are more likely to be included, and higher compensation is likely to be paid, when assurance is provided by a Big4 firm and when a company operates in a sustainability-sensitive industry. Our findings highlight the potential of assured sustainability reports in assessing CEO performance in sustainability-related tasks, especially when sustainability metrics are included in CEO compensation contracts. Overall, our results suggest companies that invest in voluntary assurance are more likely to monitor management’s behaviour and be concerned about the achievement of sustainability goals.

Keywords: Compensation, Susatinability, Assurance, Corporate Governance

Suggested Citation

Al-Shaer, Habiba and Zaman, Mahbub, CEO Compensation and Sustainability Reporting Assurance: Evidence from the UK (October 31, 2017). Journal of Business Ethics, Forthcoming. Available at SSRN:

Habiba Al-Shaer

Newcastle University Business School ( email )

Department of Accounting and Finance
5 Barrack Road
Newcastle, NE1 4SE
United Kingdom

Mahbub Zaman (Contact Author)

Hull University Business School ( email )

Hull, HU6 7RX
United Kingdom


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